Key execs of Chinese companies in India under lens

Indian authorities are closely examining directors and other key personnel of Chinese companies registered in the country to check whether these are genuine businesses and not shell entities.

The probe overseen by the ministry of corporate affairs will ascertain if the same set of people are serving on several boards, which would indicate shell companies without any real economic activity in India.

"There have been instances of individuals being on boards of multiple companies," a senior government official told ET, explaining the reason for the scrutiny.


"The idea is to look into the genuineness of operations of the entities and role of the directors."

Such shell companies will be deregistered to prevent them from doing any business in India.

The ministry is in the process of identifying and deregistering shell companies that have been involved in predatory lending by Chinese loan apps without regulatory oversight. The government is investigating entities and people involved in facilitating these loan apps.

That examination has been widened to include all Chinese companies amid concerns that similar abuse may be taking place in other sectors as well. Multiple agencies are now involved in the probe into Chinese companies.

The scrutiny includes verifying the details of Chinese nationals holding key corporate positions in India to see if they are serving as directors in more than one company. This will enable the authorities to identify the genuine ones from sham companies, said the official cited above.

The ministry of home affairs earlier this year identified 348 mobile applications, including those developed in China, which were collecting and transmitting information in an unauthorised manner to servers outside the country.

In April 2020, New Delhi amended the foreign direct investment (FDI) policy and made a prior government nod mandatory for foreign investment from countries sharing a land border with India. These changes implied that any foreign direct investment from Bangladesh, China, Pakistan, Nepal, Myanmar, Bhutan and Afghanistan needed government approval even if the relevant sector was on the automatic approval route. The measure was seen as largely targeted at Chinese investments.

An inter-ministerial committee was set up to consider proposals involving FDI from China. Such investment also required security clearance from the home ministry. A similar condition was introduced for companies applying for any procurement contract, whether for goods or services.